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01/30/2022 – Market Update

January 31, 2022 Leave a comment

 

Markets Wrap Up Volatile Month

 

The stock market was very volatile last week as readings of our Broad Market Instability index surged to 22-month high. The S&P 500 index has breached its 200-day exponential moving average to the downside, and it has developed the first intermediate downward wave. The S&P 500 index will test the 200-day exponential moving average again for a potential rebound this week. Energy, Oil Equipment, and Consumer Goods ranked as the top three sectors with mostly strong technical strengths. The US dollar index advanced sharply after the price broke above its 2-month descending broadening wedge pattern last week. The broad stock market is projected to be in a short-term neutral time-window until 2/2/2022.

 
Table of Contents


 

 

Broad Market in Short-Term Neutral Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 554 on Friday 1/28/2022 (up from 367 the previous week) which is above the panic threshold level of 42 and indicates a bearish market. The Wilshire 5000 index is below the 89-day exponential moving average, and the momentum is negative. Based on the forecast of the Leading Wave Index (LWX), the broad stock market is projected to be in a short-term neutral time-window until 2/2/2022.

 

The Leading Wave Index (LWX) Indicator in Last Four Weeks (Actual)

 

The Leading Wave Index (LWX) Indicator in Next Four Weeks (Forecast)

 

The daily chart below has the Wilshire 5000 index with both the BIX and the Momentum indicators. The current market status is summarized as follows:

Short-Term Cycle: valley
Date of Next Cycle High: 02/16/2022
Broad Market Instability Index (BIX): 554, above the panic threshold (bearish)
Momentum Indicator: negative (bearish)

 

 
Sector Performance Ranking with Energy Leading


 

The following table ranks sectors by using the StockCharts Technical Rank (SCTR) based on six key indicators which cover long-term, medium-term and short-term timeframes. Outperforming sectors are Energy, Oil Equipment, and Consumer Goods. Underperforming sectors are Biotech, Internet, and Precious Metals.

 

 

 
S&P 500 Index in Primary Corrective Wave A


 

As shown in the weekly chart below, since March of 2020, the SPX has been in a primary upward wave [5], and it has developed intermediate (1)(2)(3)(4)(5) five-wave sequence. Primary upward wave [5] is ending, and primary corrective wave [A] started. Primary corrective wave [A] is going to have intermediate (1)(2)(3)(4)(5) five-wave sequence. Now it is in the first intermediate downward wave (1).

 

The S&P 500 index formed a 3-month ascending broadening triangle pattern. The price has broken below the lower boundary of the triangle. It is bearish with a downside price target projected at 4380 which is also near the 200-day exponential moving average. This price target has been reached. The price is testing the 200-day exponential moving average for a support.

 


 
German DAX Index: Elliott Wave


 

In the following weekly chart, since early March of 2020 the German DAX index has been in primary upward wave [5] which developed an intermediate (1)(2)(3)(4)(5) five-wave sequence. Primary upward wave [5] ended, and primary corrective wave [A] started. Primary corrective wave [A] is going to have intermediate (1)(2)(3)(4)(5) five-wave sequence. Currently it is in the first intermediate downward wave (1).

 


 
India Bombay Index in 1.5-Month Ascending Broadening Wedge Pattern


 

The India Bombay Stock Exchange 30 Sensex index is forming a 1.5-month ascending broadening wedge pattern. It is bullish as long as the price stays above the lower boundary of the wedge.

 


 
Shanghai Composite Index: Intermediate-Term Pictures


 

The Shanghai Stock Exchange Composite index formed a 2-month ascending broadening wedge pattern. The price broke below the lower boundary of the wedge. It is bearish with a downside price target projected at 3500. The price has sharply declined far beyond the price target.

 

In the following weekly chart, the Shanghai Stock Exchange Composite index is forming a 1-year ascending triangle pattern. The price broke below the lower boundary of the triangle last week. It is bearish with a downside price target projected at 3260.

 


 
US Treasury Bond in 2-Month Descending Broadening Wedge Pattern


 

The 30-year U.S. treasury bond index is forming a 2-month descending broadening wedge pattern. It is bearish before the price breaks above the upper boundary of the wedge.

 


 
US Dollar Broke Above 2-Month Descending Broadening Wedge Pattern


 

The U.S. dollar index formed a 2-month descending broadening wedge pattern. The price broke above the upper boundary of the wedge last week. It is bullish with an upside price target projected at 98.4.

 


 
Gold Broke Below 2-Month Rising Wedge Pattern


 

The gold index formed a 2-month rising range between. The price broke below the lower boundary of the wedge last week. It is bearish with a downside price target projected at 1785.

 

 
Silver Broke below 1.5-Month Ascending Broadening Wedge Pattern


 

The silver index formed a 1.5-month ascending broadening wedge pattern. The price broke below the lower boundary of the wedge last week. It is bearish with a downside price target projected at 21.6.

 

 
Crude Oil Broke above 2-Month Descending Broadening Wedge Pattern


 

The crude oil index formed a 2-month descending broadening wedge pattern. The price has broken above the upper boundary of the wedge. It is bullish with an upside price projected at 94.6.

 


 
Asset Class Performance Ranking with Oil Leading


 

The following table ranks asset class by using the StockCharts Technical Rank (SCTR) based on six key indicators which cover long-term, medium-term and short-term timeframes. Currently oil is outperforming and US treasuary bond is underperforming.